Question

A study examining the performance of numerous assets from the United States and around the world confirms that a. U.S. equities are highly correlated with world government bonds and with the commodities index. b. most assets (including common stocks) have positive correlations with inflation. c. riskier assets with lower standard deviations experienced higher returns. d. beta did a better job of explaining the returns than standard deviation. e. riskier assets with higher standard deviations experienced lower returns.

Answer 1

Answer:

d. beta did a better job of explaining the returns than standard deviation

Explanation:

Beta measures the systemic risk associated with the particular investment, it do not compute the total risk associated, which is more  logical.

Standard deviation computes the total risk associated.

Some risk is natural, like the risk of floods, natural calamities, earthquake, etc:

That risk shall not counted as for comparison as that is associated universally. Further, the risk associated with particular factors like bankruptcy of a company, or some legal case issue of a company are precisely described by beta coefficient.

Thus, beta provides better details about explaining the returns.